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Financing SMEs: a model for optimising the capital structure

By A. Moro, Michael Lucas, U. Grimm and E. Grassi

Abstract

This paper argues that the existing finance literature is inadequate with respect to its cov-erage of capital structure of small and medium sized enterprises (SMEs). In particular it is argued that the cost of equity (being both conceptually ill defined and empirically non quantifiable) is not applicable to the capital structure decisions for a large proportion of SMEs and the optimal capital structure depends only on the mix of short and long term debt. The paper then presents a model for optimising the debt mix and demonstrates its practical application using an Italian firm’s debt structure as a case study

Year: 2010
OAI identifier: oai:oro.open.ac.uk:24087
Provided by: Open Research Online

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